By Libby George
LONDON, Feb 25 (Reuters) - Investors ploughed a record $22.3 billion of private credit into emerging markets last year, according to data released on Wednesday, amid banks tightening their lending and wobbles in traditionally safe markets.
The total is nearly 40% higher than the previous record in 2016, according to the data from the Global Private Capital Association, and provides a window into the private credit pivot into emerging markets as returns on Western projects tighten -
and concerns over defaults rise.
The data from industry group GPCA also showed broader private capital investments into emerging markets surging 33% to $150.3 billion. Those figures from GPCA -- a group representing private investors managing more than $2 trillion in assets in the developing world -- include private credit, private equity, venture capital and infrastructure and natural resources-focused funds.
Private credit's share of that total rose to 14%, while the share of venture capital fell for the fourth straight year, to 24%.
While nearly a quarter of the private capital spend backed infrastructure projects - and India alone accounted for $8.8 billion of it - Jeff Schlapinski, GPCA's managing director of research, said investment in the space is expanding quickly.
"There's a number of businesses that are underserved by traditional banks. They're looking for alternative funding sources," Schlapinski told Reuters of the growth of private credit.
"It's really across the board that we've seen this growing interest - in particularly energy and digital infrastructure."
Emerging markets account for less than 10% of the global private credit market, which the Bank for International Settlements estimates has surpassed $1.2 trillion.
The broad private capital cash was also focused on large projects - and the deal count fell by 10% despite the large rise in overall spending.
Part of this deal drop was down to contracting venture capital activity in China and Southeast Asia. Schlapinski said more broadly that local capital is rising in China; private capital spending in the world's second largest economy fell for the fourth straight year, to $29.7 billion - nearly 75% below the 2021 level.
"China seems to be increasingly a localized market...so government guidance, funds and local investors becoming a larger part of the ecosystem," Schlapinski said, adding that the government is increasingly encouraging domestic capital to back sectors that feed national strategic priorities, such as semiconductors, hardware and electric vehicles.
(Reporting by Libby George; Editing by Chizu Nomiyama )
